Get 40% Off
👀 👁 🧿 All eyes on Biogen, up +4,56% after posting earnings. Our AI picked it in March 2024.
Which stocks will surge next?
Unlock AI-picked Stocks

BOJ's Kuroda defends upbeat economic view despite soft data

Published 08/01/2014, 01:59 AM
Updated 08/01/2014, 01:59 AM
BOJ's Kuroda defends upbeat economic view despite soft data

By Leika Kihara and Stanley White TOKYO (Reuters) - Bank of Japan Governor Haruhiko Kuroda came out fighting on Friday, giving a spirited defence of the economy's performance after a run of weak data, and reiterated his readiness to expand stimulus if inflation faltered on the path to his 2 percent target rate.

"The BOJ is not aiming at achieving the price stability target of 2 percent temporarily. What it aims at is to achieve an economy in which inflation is about 2 percent on average year after year," he said, signalling that the central bank will not exit from its ultra-loose stimulus any time soon.

"I would like to emphasize that...given the BOJ's clear and strong commitment to the 2 percent inflation target, it is a matter of course the BOJ will make adjustments if necessary to ensure the target is met," he said at a seminar.

He stressed that the BOJ will vigilantly monitor how a decline in real income affects consumer spending.

Kuroda said an increase in summer bonus payments to workers would help consumer spending recover from an increase in the sales tax in April, while labour and supply constraints meant companies were expected to keep raising wages.

"A positive cycle of output, income and expenditure is firmly in place, so we can say Japan's economy continues to recover moderately as a trend."

There were signs, he said, that companies were ready to increase domestic investment after holding back spending on plant and equipment during a prolonged period of deflation.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Kuroda was also upbeat on the outlook for exports, which have remained weak to the disappointment of policymakers, saying that the current sluggishness was due largely to cyclical factors such as a lack of vigour in emerging Asian markets.

"We expect exports to increase moderately reflecting improvements in overseas economies," he said.

Such positive economic developments would help accelerate consumer inflation toward the BOJ's price target, Kuroda said.

Kuroda tempered his confidence in the economy with a clear message that the BOJ is willing to take further steps if risk factors damage the outlook for growth and inflation.

"The BOJ will maintain quantitative and qualitative easing (QQE) to achieve 2 percent inflation in a stable manner. If risks arise in the midst of this process, we will adjust policy without hesitation and in doing so, we have various options still available," he said in response to questions.

Since the launch of its extraordinary asset-buying scheme in April 2013, the BOJ has been scooping up about 70 percent of newly-issued government debt, including nearly all new 10-year benchmark bonds sold by the government.

With such large debt purchases by the BOJ, some economists argue there is little room to expand quantitative easing any further, while the scale of QQE has led to concerns that the BOJ is essentially bankrolling government spending - which could cause the government to lose interest in pursuing fiscal discipline.

Kuroda, however, rejected any notion that the BOJ was monetising government debt and called on the government to continue with a plan to lower its primary budget deficit, which excludes debt servicing costs and income from bond sales.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Japan's fiscal situation is particularly acute because outstanding government debt is more than twice the size of its $5 trillion economy, the worst debt burden in the world.

(Editing by Eric Meijer)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.